Here’s another way of looking at the Debt Ceiling:Let’s say you come home from work and find there has been a serwe backup in your neighborhood… and your home has sewage all the way up to your ceilings. What do you think you should do?

Here’s another way of looking at the Debt Ceiling:Let’s say you come home from work and find there has been a serwe backup in your neighborhood… and your home has sewage all the way up to your ceilings. What do you think you should do?

Raise the ceiling or remove the sh*t?

Clueless.

"To argue with a person who has renounced the use of reason is like administering medicine to the dead." - Thomas Paine

Here’s another way of looking at the Debt Ceiling:Let’s say you come home from work and find there has been a serwe backup in your neighborhood… and your home has sewage all the way up to your ceilings. What do you think you should do?

Raise the ceiling or remove the sh*t?

Advocates of sound finance (in the US known as fiscal conservatism) reject Keynesianism and, in the strongest form, argue that government should always run a balanced budget (and a surplus to pay down any outstanding debt), and that deficit spending is always bad policy.

Proponents of sound finance date back to Adam Smith, founder of modern economics. Sound finance was the dominant position until the Great Depression, associated with the gold standard and as government fiscal policy was ineffective.

The usual argument against deficit spending, dating to Adam Smith, is that households should not run deficits – one should have money before one spends it, from prudence – and that what is correct for a household is correct for a nation and its government. A further argument is that debts must be repaid, and thus it is burdening future generations to run deficits today, for little or no gain.

Chartalists, whose modern theoretical body of work on chartalism is known as Modern Monetary Theory or (MMT), argue that nations are fundamentally different from households. Deficit spending is logically necessary because fiat money is created by deficit spending: one cannot collect fiat money in taxes before one has issued it and spent it, and the amount of fiat money in circulation is exactly the government debt – money spent but not collected in taxes. In a quip, "fiat money governments are 'spend and tax', not 'tax and spend'," – deficit spending comes first.

Governments in a fiat money system which only have debt in their own currency can issue other liabilities, their fiat money, to pay off their interest-bearing bond debt. They cannot go bankrupt involuntarily because this fiat money is what is used in their economy to settle debts, while money for household liabilities must be gained first. This view is summarized as:

"But it is hard to understand how the concept of "budget busting" applies to a government which, as a sovereign issuer of its own currency, can always create dollars to spend. There is, in other words, no budget to "bust". A national "budget" is merely an account of national spending priorities, and does not represent an external constraint in the manner of a household budget."

Continuing in this vein, a structural deficit is necessary for monetary expansion in an expanding economy: if the economy grows, the money supply should as well, which should be accomplished by government deficit spending. Private sector savings are equal to government sector deficits, to the penny.

Because debt is both owed by and owed to private individuals, there is no net debt burden of government debt, just wealth transfer (redistribution) from those who owe debt (government, backed by tax payers) to those who hold debt (holders of government bonds).

For the public sector to be in deficit implies that the private sector (domestic and foreign) is in surplus. An increase in public indebtedness must necessarily therefore correspond to an equal decrease in private sector net indebtedness. In other words, deficit spending permits the private sector to accumulate net worth.